Public Bill Committee

[Sir Nicholas Winterton in the Chair]

Nicholas Winterton: I welcome hon. Members on both sides of the Committee to our thirteenth sitting and hope that they had a relaxing weekend. My wife and I had planned a restful weekend, but it turned out to be not quite as restful as we had hoped. None the less, I am here full of vim and vigour to ensure that we continue to make good progress on this important Bill. I congratulate the Committee and my co-Chairman on the progress that was made last week under her chairmanship.

Schedule 1

The trustee corporation

Nigel Waterson: I beg to move amendment No. 56, in schedule 1, page 51, line 8, leave out ‘four’ and insert ‘three’.’
It is a great pleasure to serve again under your chairmanship, Sir Nicholas. I hope that the fact that this is the thirteenth sitting is not a harbinger of bad news for anyone, but we shall see.
The amendment is simple and I can do it justice in a short time. It deals with the tenure of office of members of the trustee corporation. I do not know why the Government have alighted on four years. I should have thought that three years would have been more the norm for the initial and subsequent periods of appointment, but there might be some logic to it, so I looking forward to the Minister pointing that out.

Paul Rowen: Like the hon. Member for Eastbourne, I was a little puzzled by the provision. Three years is the usual appointment period. I look forward to hearing what the Minister has to say about a period of three or five years and why the Government have alighted on four years.

James Plaskitt: Let me also say to you, Sir Nicholas, what a pleasure it is to be serving under your chairmanship at our thirteenth sitting. Let us see if I can start off on a good note by reassuring the hon. Gentlemen about why the terms are set as they are.
This part of the schedule deals with the period for which a person can be appointed a member of the corporate trustee. It restricts the period of an individual appointment to a maximum of four years and prevents someone from being reappointed more than once, as a result of which no one can serve for more than a total of eight years.
I wish first to explain that we intend trustee appointments to follow the principles in the code of practice of the Office of the Commissioner for Public Appointments. That code suggests that it is in the public interest to limit the length of appointments made by Ministers to no longer than a total of 10 years in order to encourage new blood and new ideas and to give other people the opportunity to serve on public bodies. It states:
“The number of terms an individual may serve and the conditions for reappointment vary...However...the maximum period in office must not exceed 10 years on the same board.”
Although, in the case of the corporate trustee, subsequent appointments will not be made by Ministers, we believe that the good practice of limiting the term of appointment should be included in the Bill. The question to consider when determining the length of appointment is what best serves the needs of the task in hand.
I am sure that members of the Committee have noticed that initial appointments to the Personal Accounts Delivery Authority are for a three-year period. That is standard practice for non-executive appointments and for fixed-term contracts, such as the chief executive, but that difference in approach is also appropriate given the different responsibilities. PADA will be a relatively short-lived organisation when compared with the anticipated longevity of the scheme. The most effective blend of trustee for the longer term trustee corporation will be a mix of new ideas, experience and corporate memory. We have chosen a period of sufficient length to match the responsibilities of the trustee while remaining well within the maximum proposed in the guidelines of the Office of the Commissioner for Public Appointments.

Paul Rowen: I am listening to what the Minister is saying. I said that it was normal for a term to be three or five years, and he has confirmed that the guidance sets out a maximum of two terms of five years. He has chosen four years, so will he explain why the longer period recommended by the public appointments committee was not what was put in the Bill?

James Plaskitt: The guidelines set out a maximum of 10 years, and two terms of five years would obviously go right up to the maximum. Our view is that by going for a potential maximum of eight years, we have struck the right balance of staying within the guidelines and having the right mix of experience and length of tenure of office. This is not far out of practice with other bodies and organisations. A four-year term with the possibility of one renewal strikes the right balance and keeps us within the guidelines. With those reassurances, I hope that the hon. Member for Eastbourne will withdraw the amendment.

Nigel Waterson: When I tabled the amendment, I had no idea that it would be so complicated to get an answer. If the Minister had simply stuck a pin in a series of numbers, I would sit down immediately. He has made the case for five years and for three years, but he has not made it for four years. However, life is too short, so I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Nigel Waterson: I beg to move amendment No. 57, in schedule 1, page 51, line 19, leave out ‘the Secretary of State may determine’ and insert ‘it thinks fit.’
Again—famous last words—this is a simple amendment that has been designed to tease out why the Secretary of State should determine the remuneration, allowances and gratuities paid to members of the trustee corporation. In all these matters, the Secretary of State should keep at arm’s length, if possible. It should be possible for the trustee corporation to regulate such matters itself, possibly by way of a remuneration sub-committee or something similar. I find the reason why the Secretary of State should have his fingerprints on every aspect of the detail of the running of the trustee corporation slightly mystifying. I hope that the Minister can demonstrate that there was serious thought behind the benefits of the provision and that he can tell us why it makes enormous sense.

Paul Rowen: I found a note given by the Secretary of State about the difference between the trustees and PADA very interesting. As this is a non-departmental public body—an arm’s length body—why is the Secretary of State able to determine the minutiae of its running? I agree with the hon. Member for Eastbourne that PADA is a different organisation. It is a delivery authority and the trustees take it forward. It should be for the trustees themselves to agree the remuneration, having taken advice and after looking at what the industry normally does. We seem to have the big footprint of Government stamped all over a body that in previous debates has been spoken of as “light touch”. This seems to be anything but light touch.

James Plaskitt: Let me see if I can demystify this. I will try to reassure the hon. Gentlemen that there are good reasons behind the arrangement in the Bill.
The amendment would remove the Secretary of State’s ability to determine the levels at which remuneration was set. We intend that the trustee corporation will act independently of the Government. That is right, and our aim is for an emulation, as far as possible, of trust-based occupational pensions schemes in the private sector. None the less, the trustee corporation is being set up as a public body with a central role in delivering a key aspect of public policy. Quite rightly, we expect a high standard of propriety from public bodies, and it is standard practice to include mechanisms for the Government to ensure that they achieve those high standards.
There is a balance to be struck, as the hon. Member for Rochdale indicated. For example, we intend the trustee corporation, once it is up and running, to have the freedom to appoint its own members, but in so doing, it should follow the good practice of the Office of the Commissioner for Public Appointments. When creating a non-departmental public body, it is standard practice to give the Secretary of State of the sponsoring Department the responsibility for remuneration. That is to ensure that the remuneration paid is in proportion to the role and weight of the posts. To reassure members, the Treasury 2007 guidance states:
“Whatever the legal status of an Arm’s Length Body, the Treasury will expect its sponsor department to have a mechanism for asserting an appropriate degree of control over it, especially in financial matters”.
Furthermore, Cabinet Office guidance states that Departments are responsible for determining whether remuneration should be paid to the board members of the public bodies they sponsor and the level at which that remuneration is set. The Bill simply follows the guidance. Such a procedure involving Government guidance on remuneration for key posts also applies to NDPBs such as the Civil Aviation Authority, the BBC Trust and the Independent Police Complaints Commission.
Allowing members of the trustee corporation to set their own levels of remuneration, as implied by the amendment, would be a highly unusual step in the public sector, since no other comparable body bears that responsibility. There is a further consequence of what the hon. Member for Eastbourne is suggesting: the trustee corporation would be left open to accusations of conflict of interest, as its members would be in a position in which they could set their own pay. Many of us in this room are aware of the problems that that might entail, but that would be especially so in this case as the members’ remuneration would come from scheme funds and thus would be paid by scheme members. That is a further reason why it is quite appropriate that the Secretary of State should have some involvement. Far from this being a heavy boot, as the hon. Member for Rochdale suggested, it is an essential safeguard, given the source of the funding to pay the remuneration, and the potential conflict of interest if this were done by some other arrangement to the one set out in the Bill.
In seeking this power, our intention is not to meddle in the day-to-day affairs of the scheme, but to use a standard mechanism by which the Government can ensure that a public body is conducting itself in the way in which we and members of the pension schemes would expect. With those reassurances, I hope that the hon. Member for Eastbourne will agree to withdraw the amendment.

Nigel Waterson: I am grateful to the Minister for that explanation and reassurance. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Nigel Waterson: I beg to move amendment No. 68, in schedule 1, page 54, line 42, leave out ‘and’ and insert—
‘(aa) an analysis of the potential impact on the financial position of the trustee corporation of different levels of—
(i) take-up of;
(ii) persistency in; and
(iii) contributions to,
the scheme, and setting out appropriate options for managing the financial risks associated with different outcomes; and’.

Nicholas Winterton: With this it will be convenient to discuss the following amendments: No. 69, in schedule 1, page 55, line 2, at end insert—
‘(2A) In preparing the report, the Trustee Corporation must have regard to such independent actuarial advice as it considers appropriate.’.
No. 65, in clause 61, page 28, line 29, at end insert—
‘(3A) The authority must within 12 months of the passing of this Act, and at such other time as the Secretary of State directs, publish a report analysing the potential impact on the financial position of a scheme under section 50(1) of different rates of—
(a) take-up of;
(b) persistency in; and
(c) contributions to
the scheme, and setting out appropriate options for managing the financial risks associated with different outcomes.
(3B) In preparing the report under subsection (3A) the Authority must have regard to such independent actuarial advice as it considers appropriate.’.

Nigel Waterson: The amendments all aim to achieve the same thing, so I apologise if there is a certain amount of confusing duplication involved. We intend that either or both of those bodies—if either, preferably PADA—should, within 12 months of the passing of the Act, and at other times in the future as directed by the Secretary of State, publish a report analysing the impact of the new scheme, which is set up under clause 50. It should examine rates of take-up, persistency and contributions to the scheme, and set out appropriate options for managing the financial risks associated with different outcomes. We also suggest that the authority should obtain independent actuarial advice and publish that at the same time. This is all to do with having the maximum transparency as we head to the starting point of personal accounts, hopefully in 2012.
It will probably be convenient if I deal now with the broader general issues and hopefully obviate a stand part debate, as is common practice these days. It is interesting that in only the past few days, the delivery authority has published its consultation on a possible charging structure. It set out four options: first, an annual management charge when members pay a fixed proportion of the funds under management each year; secondly, a contribution charge when members pay a fixed proportion of each contribution that they make into personal accounts; thirdly, a joining charge—a one-off, up-front fee on joining the scheme—which might be fraught with problems; and, fourthly, a combination of a lower contribution charge with an AMC. I am sure that responses to the consultation will be flooding in. It runs until 22 April, which is a generous period, and the delivery authority will publish its responses to it by 15 July.
While it is important to set out the options for how the charges will be structured, it is impossible at this stage for those running PADA to have an idea of the size of the charges, and I shall come to that in more detail later. In its brief on the amendment, AEGON states:
“In setting the charges to be applied to personal accounts, the Delivery Authority will need to make a set of assumptions around take-up, persistency and contribution levels for the new scheme”,
hence the thrust of the amendments. It goes on:
“Unlike a group personal pension or a trust-based scheme backed by an employer, there is nobody ‘standing behind’ the scheme, so the questions arise as to how any shortfall in revenues will be covered.”
That brings us neatly on to public subsidy and the so-called level playing field.
So far, the Government have been insistent that the scheme will not require public subsidy. I dug out the comments of the Minister for Pensions Reform when he gave evidence to the Committee on 17 January. When I asked him about public subsidy, he replied:
“In terms of public subsidy, our aim is that personal accounts should operate in the same way as most other pension schemes. They would not have a level of public subsidy which would be unacceptable. Indeed, it is the role of the members to pay for the operation of that pension scheme.”
When talking about getting the costs down to 0.3 per cent., he said:
“I made it clear in my evidence to the Select Committee that it may well be 0.5 per cent., at least initially.”
When referring to the budget for PADA, the Minister drew attention to the £21 million for 2007-08, for which we voted during the passage of the Pensions Act 2007, and said:
“We will look at what costs PADA will need in the future, and it has an ability to raise funds if it needs to do so...I want to make sure that once we get beyond that and into the personal accounts board and having an NDPB running a pensions scheme, we will have an organisation that is primarily self-funding.”——[Official Report, Pensions Public Bill Committee, 17 January 2008; c. 113-14, Q138-39.]
We agree. However, obviously the costs are clicking up already. In answer to a written question that I tabled the other day, the Minister said that expenditure on consultancy advice about implementing the personal accounts system had amounted to £6.6 million up to the end of October. Will the Under-Secretary update that figure? A great deal of money has been, and is being, spent. It would be interesting to know how much of the £21 million originally voted for PADA has already been spoken for.
The Government’s policy is clear: the scheme must be self-funded. That means no hidden subsidies, no sweetheart deals, no low-interest loans and so on. We will come on to the specifics later on. The brief from AEGON continues:
“But in the absence of such subsidy, the only recourse would be to borrow potentially large amounts of money. In the absence of other income streams or a sponsoring employer,”
which clearly this scheme will not have,
“this borrowing could only be funded by increasing charges to scheme members.”
It touches on the possibility that
“charges may rise in the future”,
and that calls into question one or two of the options, especially the joining fee set out in PADA’s recent document about its charging structure.
Amendment No. 65 would place a duty on the trustee corporation and PADA to publish a report that examines the issues in detail and sets out how different scenarios for take-up, persistency and contributions will be managed. In short, it would give the Secretary of State a power to require updates from the authority. That would enable a new Secretary of State in an incoming Government—hopefully a Conservative one—to ask for further actuarial analysis ahead of the expected, although by no means certain, go-live date of 2012.
The proposed reporting duty falls some way short of that required of trustees of a defined benefit scheme, as set out in the Pensions Act 2004. However, it goes beyond that required of a normal defined contribution or money purchase scheme. In view of the strong public interest about the new system of personal accounts, and the potentially massive importance of it to many millions of people, the approach strikes the right sort of balance.
I shall set out one other important issue, which was again raised by AEGON. In welcoming the consultation announcement about the charging structure, it said:
“it is encouraging to see a clear acceptance that a flat annual management charge is not the obvious starting point.”
That point is worth making. AEGON also said that it was
“puzzled as to why PADA believes there are commercial sensitivities over publishing its financial modelling.”
I take the opportunity to note that the consultation on charging structures has been financed by PADA. It would be helpful to have the Under-Secretary’s input and to hear his thoughts on the four options, on why PADA cannot publish its financial modelling, and on how difficult it is at this stage for it to have financial modelling, given that it is very difficult to predict the actual costs so early in the game. On that basis, I commend the amendment to the Committee.

Paul Rowen: Schedule 1 sets out how the Personal Accounts Board will operate. I believe that in setting up personal accounts, we move into uncharted waters. This is not an employees’ occupational pension scheme through which, as the hon. Member for Eastbourne mentioned, a shortfall in the scheme can be met by increased employer contributions. We have little information. We can make estimates about take-up, and we have had extremely involved discussions about contribution levels and how people with varying income levels can access the scheme. However, we do not know how things will work out.
The hon. Gentleman assessed some of the issues, such as the charging structure. I welcome the fact that PADA has started a consultation on that. I believe, as AEGON said, that it is important to have flexibility within the charging structure that is adopted, because it is important that personal accounts are self-financing. I do not want to see a situation whereby, because of the nature of what has been set up, a large Government subsidy is required in future. That would go totally against the spirit of the Bill. Equally, we do not know what the future holds, and the ability to report and present actuarial evidence of how the Personal Accounts Board is operating is important.
We talked earlier about the need for transparency in what we are doing. Personal accounts will involve an awful lot of people who currently do not have access to a pension scheme. We need, therefore, an ongoing mechanism to ensure that as the scheme cranks up, there are regular reporting points on how it is progressing. Amendment No. 65 is important because it would require a report on the financial position that would include evidence of take-up, persistency and levels of contributions to the scheme, and a measurement of that against the running costs of the scheme. We know that in the initial years the costs will be much higher than what will be recouped by the contributions, whatever type of management charge is introduced. It is therefore important that there is a mechanism to ensure that such ongoing discussion takes place.
The financial models that are used by PADA and the Personal Accounts Board must be made available. We must know the assumptions on which the board is operating. Obviously, PADA will be doing a lot of work on this in the next few years and it is important that that information is made available and is up front. That is the best way to ensure that personal accounts get off to being the success that we all want to them to be and that there is flexibility in the system, so that if changes occur that were not predicted at the beginning—I cannot believe that it is possible to predict all the changes—they are reported and prompt action is taken. The worst scenario would be for the organisation to continue on its own as an arm’s length organisation believing that it is doing its best and that it can sort out a problem in the long term, yet meanwhile storing up huge debts that will saddle future members with increased costs. It is important that we have a model from the word go that ensures that costs are recoverable within a time frame that does not mean that future members will be saddled with costs for which they receive no benefit.

John Greenway: I will not detain the Committee long, but I want to make two brief points. First, as my hon. Friend the Member for Eastbourne said, the amendments were suggested by AEGON. I want to remind the Committee that the chief executive of AEGON is Mr. Otto Thoresen, on whose support the success of the measure so depends through his work on generic financial advice on which he will report in about four weeks’ time. While I thought that it might be helpful to point out that the proposals come from a good source on which the Government will rely heavily for the success, or otherwise, of the Bill, I will not labour that point.
Secondly, there is a possibility of some confusion about what is proposed in paragraph 17 of the schedule regarding the annual report, so we might be looking at two different things. We need to know—the Secretary of State and, through him, Parliament need to know—how the corporation is functioning. From my reading, that is the clear intention behind the provision and the note about it.
Amendment No. 68 would do something slightly different, albeit something extremely important that appears to be lacking in the Bill. When assessing the potential success or otherwise of the personal accounts initiative, we must have regular information about take-up, how many people opt out, persistency, levels of contributions and so on, because otherwise Parliament will be in no position to judge whether the scheme is a success. Given the cross-party consensus on the proposals, irrespective of whether the Minister accepts the amendments—one suspects that he will not—will he acknowledge that it is important for that information to be available to Parliament and the wider world so that we can make an ongoing assessment of the scheme’s success?
It will be several years down the track before the measure comes into effect, so there will be another elected Government and different Ministers in place. It is vitally important that a clear commitment is made through this Public Bill Committee process that, by one ruse or another, that kind of information will be available to Parliament and the wider world. There should be an obligation on the delivery authority to provide that information. This is a way of flagging up the fact that, as far as I see, there is nothing in the Bill to say that that information will be published. In reality, I cannot believe that it will not be made available, but we need some reassurance about that.

James Plaskitt: This is indeed an important aspect of the Bill and I am pleased that we are debating it. It is right for hon. Members to seek such reassurances. I am grateful that PADA’s consultation on charging has been acknowledged and welcomed. It is, of course, a consultation on the charging structure, not charging levels. It is welcome, and I am sure that it will be important in terms of finalising the scheme’s details. I am also pleased that there is general support and recognition for the important principle that the scheme will be, in due course, self-financing. I hear that there is an acceptance of the situation during the set-up years—this is a separate issue—but in the long term, it must be self-financing.

Nigel Waterson: I think it was Keynes who said that in the long term we are all dead. What is the Minister’s definition of long term with regard to amortising PADA’s start-up costs?

James Plaskitt: Certainly, in the long term, Keynes was dead and so were some of his ideas. We cannot put a precise number on that, as I am sure that the hon. Gentleman understands. It is understood that there has not been a venture on this scale before. How long it takes to reach a point of self-financing will depend on the number of people who come into the scheme and how long they stay in it. It will also depend in part on the charging structure of the scheme. The hon. Gentleman will recall that we listened to a number of witnesses giving evidence on that subject during the introductory sittings of the Committee. No one can put a precise number on that—I do not suppose that he can and I certainly could not—but we do know that it will depend on the decisions that people make and the levels of opt-out. That is all the more reason why the design and the climate in which the scheme launches must be right.
We would like the scheme to reach the point of self-financing as soon as possible. That requires the launch and take-up to be a success and for matters such as the charging structure to be right. However, if the hon. Gentleman asks me to put a date on that, I cannot, and nor can anybody else at this time.
I appreciate hon. Members’ concerns about how participation in the scheme and the contributions to it could affect its financial position and about whether that could entail any degree of public subsidy to the scheme—how much and for how long. As I have just reiterated, it is our intention that the scheme will be self-financing in the long term, but during the phase when the scheme is being set up and for some time after the scheme accepts its first members’ contributions, its revenues will be insufficient to cover its costs. We have asked PADA to advise us on how best that shortfall in revenues may be financed in a way that balances commercial viability with low charges.
The provisions in the Bill are necessarily wide because an optimal funding solution has yet to be developed—that is what PADA is working on. It will depend on a number of things, including the costs of setting up and running the scheme and the factors that influence the flow of revenues into the scheme, including those raised by the hon. Member for Eastbourne: the potential take-up of the scheme and how much, how regularly and for how long members contribute—the issue of persistency in contributions to which he rightly referred.

Nigel Waterson: I am following what the Minister is saying closely. I do not want to run the consultation here and now, but does he agree that a possible fatal flaw in the idea of a one-off joining fee is that if it is pitched too low, those members would benefit disproportionately and there would be an additional amount to be collected from later joining members, particularly if the persistency is awful? If one adopts the Steve Bee scenario, a lot of people will rush for the exit after two or three months because they have suddenly realised that, due to auto-enrolment, their pay packet is a bit light.

James Plaskitt: The hon. Gentleman tempts me to start opining a view on the options on which PADA is consulting, in respect of the charging structure. It would be quite wrong to do that when the consultation is just getting underway and it is a matter for PADA anyway, not for me. He is right to say that there would be difficulties in opting for just a joining fee approach, but that is pointed out in the consultation document. It is a potential shortfall that PADA identifies. The purpose of the consultation is to run out all of the options for a charging structure, with a view to coming to a conclusion about what is the best charging structure. Each option that it looks at has plusses and minuses to it; it must reach a view, in the light of responses that come into the consultation, about what the appropriate charging structure is to achieve the ideal outcomes that we want. It will engage in precisely the sort of debate that he has just raised.
The precise costs of setting up and running the scheme will not be fully known until the authority is much further down the track in negotiating the contracts for services underpinning the delivery of the scheme. However, we anticipate that, based on data and latest research among employers and individuals, the scheme could have up to 7 million active members. I am confident that the scheme can be delivered in a way that ensures that there is no unfair subsidy from Government and that meets our intention for the scheme to be self-financing in the long term and to deliver at no cost to the taxpayer.
Amendment No. 65 would require the authority to publish a report on the potential impact on the financial position of the scheme under various revenue scenarios, within 12 months of Royal Assent. Amendments Nos. 68 and 69 would place a similar requirement on the trustee corporation and suggest the corporation seek independent actuarial advice. The authority will continue analysing all those factors in developing an optimal funding solution and will consider how it may be adapted under various revenue scenarios. That includes a rigorous analysis of the assumptions and associated risks around take-up, persistency and contributions and how they impact on the financial position of the scheme. Specific provisions in the Bill are not needed to ensure that that work is done. Indeed, it has to be done.
I see no benefit in adding to the already comprehensive regime of financial accountability between non-departmental bodies and their sponsoring Departments. As non-departmental bodies, both the authority and the trustee corporation will be required to publish annual reports and accounts to Parliament. The trustee corporation will also have an overriding duty to act in members’ best interests, including the prudent financial management of the personal accounts scheme. There will therefore be transparency in the scheme’s financial position. Any revenue received would be shown in the accounts of the scheme or the authority, whether it has come from membership charges or other sources including, of course, the Government—if that were required.
I hope that our debates have put members of the Committee in no doubt about the Government’s intention that the personal account scheme will not be given unfair public subsidy. They are right to raise concerns about the extent to which the number of future members and their level of contributions might impact on the financial strategy for the scheme, but I assure them that we are confident that the scheme will be viable within the parameters that have set publicly. Its financial position will be made transparent through existing reporting and accounting requirements that apply to both the trustee corporation and the delivery authority. Given those reassurances, I hope that the hon. Member for Eastbourne will agree to withdraw the amendment.

Nigel Waterson: I do not want to prolong matters, but we shall continue to unpack such issues in the next couple of debates. One man’s unfair public subsidy is another man’s sensible precaution. We will need to probe a little further into exactly what the Minister means by “unfair” and “long term”. For the moment, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Nigel Waterson: I beg to move amendment No. 59, in schedule 1, page 55, line 10, leave out ‘grants’.

Nicholas Winterton: With this it will be convenient to discuss amendment No. 60, in schedule 1, page 55, line 11, leave out from ‘which’ to end of line 12 and insert
‘shall include conditions about repayment and interest at commercial rates.’.

Nigel Waterson: In a film, the late, great Kenneth Williams memorably said, “Infamy! Infamy! They’ve all got it in for me!” I hope that PADA does not feel that I have it in for it by trying to block a source of income or personal accounts at the start of its fledgling career. It is important to pin down the Minister on exactly what the Government have in mind in respect of propping up PADA in its early days, particularly if is not as successful as Ministers hope and predict.
Amendment No. 59 is straightforward. It would remove “grants” from the provision. I do not know on what basis the Government are considering making grants to the trustee corporation. Perhaps we should be told. The nature of a grant is that it is not expected to be repaid, so what notion of grants is the Government looking at? What size and basis do they have in mind? In what circumstances would a grant of taxpayers’ money be appropriate to an organisation that is conceded by Ministers to be self-financing in the long term? I would prefer them to use the description “medium term”.
Amendment No. 60 is designed to make sure that, if money is lent by the Treasury or the Department, to PADA, it is repaid and that the terms of such loans should be transparent and based on commercial rates, with a proper and appropriate period for repayment.
It would send some serious messages to the industry if the Minister were not prepared to accept at least the second of these amendments, and to clarify the nature of grants in this context. Looking at the evidence of Mr. Stephen Haddrill, from the Association of British Insurers, when I asked him about the level playing field and the public subsidy issue, he said:
“The primary one that concerns me is that there is a power in the Bill for the Secretary of State to make loans to the personal accounts system and to do so without necessarily charging any interest and I cannot see why that should be the case.”——[Official Report, Pensions Public Bill Committee, 15 January 2008; c. 35, Q50.]
I am sure that many of the companies that make up the Association of British Insurers would be delighted if the Government were prepared to offer them interest-free loans with rather loose arrangements for repayment. He goes on:
“It is very important that the system and the consumers of it—the people who go into it—absorb the costs of it just as people who are in other pension schemes have to absorb the costs of those pension schemes...Why should someone who is in a personal account get a taxpayer subsidy other than the basic pension subsidy when somebody in another scheme does not?”——[Official Report, Pensions Public Bill Committee, 15 January 2008; c. 35, Q50.]
That is a good question, one that I hope the Minister will feel able to answer.
We talked about borrowing. There is not an unrealistic view from the industry. Dick Saunders said at the evidence-taking session:
“There will be a need for the scheme to borrow in the early years to beat that J-curve, which any business plan has. Obviously, that borrowing should be on arm’s-length terms; I am sure the Treasury will not want to lend to it interest-free.”——[Official Report, Pensions Public Bill Committee, 15 January 2008; c. 36, Q50.]
In addition, Mr. Haddrill said,
“what we do feel is, if there is a level playing field with no taxpayer subsidy, that we will take on the competition. That is the sort of industry it is.”——[Official Report, Pensions Public Bill Committee, 15 January 2008; c. 37, Q52.]
I commend that kind of thinking.
I do not think that ABI members or others are fearful of personal accounts; they made it clear in their oral and written evidence that in principle they support the notion of trying to tackle the problem of the target group or groups, who are not currently saving for their retirement and should be. In fairness, they have trooped into the endless seminars, discussions, working groups, consultations and everything else, trying to be as helpful as possible. Where they draw a line, on behalf of their shareholders, is unfair Government subsidy to make personal accounts overly competitive with existing provision. That would be bad for business, but more importantly, it would erode existing pension provision, where we know that the average employer contribution in DB schemes, according to the National Association of Pension Funds, is something like 16 per cent., which dwarfs the 3 per cent. envisaged in personal accounts.
I must pin the Minister down on these amendments; he must give a satisfactory explanation, to the Committee and the industry, of the circumstances under which grants will be given from the Government to PADA, and the basis on which loans would be advanced.

Paul Rowen: I do not know whether those who drafted the schedule were trying to do the usual civil servant catch-all and include all possibilities in which money or assistance might be sought. That is one possible interpretation of the word “grants”. It is important that, given the Minister’s earlier comments, we have clarification of what the trust board should do. There is one circumstance and one circumstance only where it is proper that the Government can give grants, although I am not sure that those should be to the trust board. We had an earlier discussion about advice and information and provision for that. Looking at schedule 1, I do not see it as being the responsibility of the trust board to provide that information. However, it is legitimate for that sort of information to be provided with some form of Government subsidy or advice alongside the range of other financial advice available through Citizens Advice or whatever. That is a separate issue to schedule 1, which deals with the trust board.
Again, I agree with the hon. Member for Eastbourne: if we are setting this up, we should state clearly from the beginning that there is no subsidy and that any loans granted will be paid back. We must know the terms on which those loans will be granted. Unless it is a usual civil service catch-all, I see no need to include the possibility of obtaining finance for including the word “grant”. If the trust board administers the funds and invests them to ensure a return on someone’s pension, it should operate, as should every scheme, with its costs fully covered. In this case, as it is not an occupational pension scheme, it must be covered through the charges that it makes.

James Plaskitt: As hon. Members have identified, this is an important aspect of the Bill. It is right to seek these reassurances and I will try to oblige. There is understandable interest in how the personal accounts scheme will be funded, whether the scheme will receive financial support from the Government, and if so, in what form. Let me reassure the Committee of the Government’s intentions in that area.
The personal accounts scheme should be self-financing in the long term—I know we will discuss that further—through charges paid by the members of the scheme, and be delivered at no overall cost to the taxpayer. I want to stress that if any degree of Government support is involved in helping the scheme get up and running, it will be fully compliant with all European requirements on competition and state aid—it must be, it should be, and it will be. However, as with many new businesses, there will be a period of time during the scheme’s early years when revenues will be insufficient to cover set up and operational costs. That is understood and accepted.
No decision has yet been made on the best approach to filling that funding gap. It will be for the personal accounts delivery authority to consider the range of funding options available and to make recommendations to the Secretary of State about the best possible approach. Before the authority can provide such advice, it must carry out further work on the detailed design of the scheme, refine its estimates of the costs, and engage with private sector suppliers who will deliver the services that underpin the scheme.

Nigel Waterson: If I remember rightly, the consultation document on the charging structure says that by July this year, the authority will announce its conclusions. Is the Minister aware whether, in that same time scale, it expects to have reached a conclusion as to the likely actual costs that must be recouped? On that basis, it seems to be a tight time scale and could seriously affect certain options—I touched on the initial one-off joining fee. I do not want to draw the Minister too far down that route, but I raised it as an example where, crucially, the amount to be recovered makes it either a viable option or not.

James Plaskitt: I think that PADA expects to have sufficient information on which to base its decision by the end of the consultation on the charging structure. The consultation will come to an end and there will be a period of deliberation in response to that, which will provide further time. During that time, sufficient information will become apparent to give it a basis for reaching a decision.
The hon. Members for Eastbourne and for Rochdale both referred to what I might call the competition between the trustee scheme and commercially provided schemes on the question of whether it is appropriate to have any degree of public funding. However, one crucial difference needs to be underlined. When giving evidence to the Committee, Paul Myners said:
“We have a universal service provision obligation.”——[Official Report, Pensions Public Bill Committee, 15 January 2008; c. 14, Q14.]
That makes it different from the commercial sector provision. The schemes cannot pick and choose who they take on; they have to take everyone. That fundamentally alters the nature of those pension schemes, putting them in a different situation with respect to charges and running costs, and ultimately returns, to privately provided purely commercial pension schemes, which can exercise far more choice in that respect.
The personal account scheme is therefore unique, but we should not underestimate the challenges that the authority will face when setting it up and developing it. As I said, it is the largest occupational pension scheme in the United Kingdom. When up and running it could easily have as many as 7 million active members. It will be specifically targeted at those who do not have access to a good, low-cost workplace pension scheme; and as Mr. Myners said it cannot pick and choose its customer base.
Once the authority has developed the scheme and its procurement strategy, it will provide advice on the funding solution that provides the best balance between commercial viability and low charges—and I accept that the charges will be important to making the scheme successful. However, all that work can happen only once the authority’s powers have been extended under the Bill, so that it can take the next steps to implementing the scheme. It is therefore important that we do not second-guess the outcome of its work—nor, as the amendments do, should we place undue restrictions on the authority in its consideration of the funding strategy.
It is common practice—the hon. Member for Rochdale alluded to the fact—to take broad powers to finance a non-departmental public body involved in a major project, especially such a one as this in respect of personal accounts. However, I stress that it does not mean that any of those specific powers will necessarily be used. It simply ensures that the authority has the flexibility to identify the funding strategy that provides the best deal for members. In my view, it would be wrong to fetter the development of the best funding solution by insisting on the removal of a potential approach to delivering that financial support.

Nigel Waterson: May I make clear that my amendments are not designed to fetter the authority? They are designed to fetter the Government. Apart from saying, “We stuck it in because that is what we do in these circumstances,” the Minister has yet to give us a scenario in which he might consider making a grant—presumably a non-recoverable one—to the authority.

James Plaskitt: That brings us back to the heart of the debate. Indeed, it is the point that I am making—that before PADA has completed its work and before decisions are made on how the funding gap should be addressed, it is important to keep our options open. Without any of those things having been done, I cannot say now what precise circumstances would lead to a grant. It would fetter the operation if, at this stage, before any of those decisions had been made and that work done, the Government or PADA removed the possibility of extending the grant to the organisation.
As I said, it is standard practice when setting up non-departmental public bodies to have that funding option. That does not mean that it will be used, but given the scale of what has been taken on and given that PADA has yet to make decisions in respect of the funding structure, it would not make sense to remove one of the options. Indeed, it is sensible to include it in the suite of funding arrangements that the authority could draw upon.
I reassure the Committee that we have no intention of unfairly subsidising the personal accounts scheme. If any Government support is involved, it will be fully compliant with European requirements on competition and state aid. Transparency will ensure that it is also known about, which is clearly very important.

Nigel Waterson: On the issue of transparency, will the Minister confirm that loans will be repayable within a reasonable and set period, and that they will be subject to commercial rates of interest?

James Plaskitt: That is not exactly the same as the transparency point. On the issuing of annual reports, any funding source that has come into the authority will be reported. In that sense, it is transparent, as are the terms on which that funding is provided. It is not for me to anticipate what kind of deal might be offered. As regards public confidence, it is important that there is transparent reporting. With those reassurances, I hope that the hon. Gentleman will agree to withdraw his amendment.

Nigel Waterson: I am not at all content. The Minister is giving us no assurances about there not being grants of any size for whatever purpose—presumably they will be non-recoverable. Nor has he been prepared to give any assurances about commercial rates of interest and repayment over a sensible and normal period. However, he has promised us that when such things are done, they will be transparent. That means that we will get to know about them, which is great. I am not an expert on the European legislation, but I think that the Europeans might have something to say about a non-interest bearing loan, let alone a grant. With all due respect to the Minister, I do not want to leave it to the European Union to sort this out. We need to know the situation now.
The Minister has not said—quite the opposite—that he would not be in the business of issuing grants or non-interest-bearing loans to PADA. In this Bill, it is very important that we set out the parameters for PADA—not only for funding, but for other things—so that it knows that it can cut its coat according to its cloth. The cloth must be made available. If it is apparent to PADA that an escape route of Government grants or non-interest-bearing loans will always be available, it might not concentrate its mind as much as it should on getting its sums right. Whatever deal—to use the Minister’s word—is concocted between the Treasury and PADA, it needs to be known about in advance.
The industry has a legitimate concern about a level playing field. The Minister still talks about long-term rather than medium-term funding when most organisations are in the business of predicting profit and loss. I am not content. Unless the Minister can give me more reassurances, I am minded to press the amendment to a Division.

Question put, That the amendment be made:—

The Committee divided: Ayes 6, Noes 8.

Question accordingly negatived.

Nigel Waterson: I beg to move amendment No. 61, in schedule 1, page 55, line 13, leave out ‘may’ and insert ‘is required to make.’

Nicholas Winterton: With this it will be convenient to discuss the following amendments: No. 43, in clause 62, page 29, line 13, at end insert
‘and initially based on an annual management charge of no more than 0.3 per cent. per annum.’.
No. 52, in clause 64, page 29, line 39, at end add—
‘( ) For the avoidance of doubt, all the costs incurred by the Authority in establishing the pension scheme under section 50 of the Pensions Act 2008 (c. ) shall be recouped through charges to members over a period of five years from 2012.’.

Nigel Waterson: This interesting group of amendments raises some subtly different issues. Amendment No. 61 continues on from the previous debate and would insert into schedule 1, where it says,
“The trustee corporation may make charges in connection with the exercise of its functions”,
an obligation on such a body requiring it to make charges. That is sensible in terms of bringing revenue into the trustee corporation.
Amendment No. 43 relates to clause 62 and I will return to it in more detail later. It is a probing amendment that would insert a provision to the effect that the annual management charge should be
“no more than 0.3 per cent. per annum.”
Amendment No. 52 sweeps up a lot of what was debated under the previous two groups. The amendment would make it clear that all costs incurred by the authority in establishing the pension scheme under clause 50 of the Bill
“shall be recouped through charges to members over a period of five years from 2012.”
I shall deal with this matter first in some detail. Debate has raged for the past hour or so about what “long term” means. The Minister is adamant that the scheme is intended to be self-funding in the long term, but we would be much more comfortable with the expression “medium term”. I am the first to admit that one cannot be absolutely clear-cut at this stage, but we need some idea, in very broad terms, of the Minister’s thinking.
In amendment No. 52, I have plumped for a period of five years up to 2012. That might be over-optimistic or about right. However, it is important that rather than just having vague ministerial assurances that the scheme shall be self-funding in the long term, we have some idea about the time scale in which PADA and the board are meant to get themselves into equilibrium in respect of their costs and charging.
Even if we cannot resolve the matter today, it has to be resolved fairly soon. I have already mentioned the PADA consultation on the charging structure, which says that it will reach a conclusion, following that consultation, by July. As the Minister has already conceded, that would make little sense if it did not also have a fairly clear idea by then about the likely costs that it will have to recoup. It will be interesting to see where we are going on the percentage charge, as well as on the form of the charge. However, as I have already argued, it could knock for six straight away the option of a one-off joining fee for lucky first-time members joining in the first wave, as it were, which may be wholly unrealistic in terms of the recovery of the total costs over the long term that the Minister keeps talking about.
Although I do not want to press amendment No. 52 to a Division, I am still pressing the Minister hard, as we did with the last group of amendments, about what the Government have in mind. I do not mean any ill will to the Minister’s career prospects, but by the time this is all hammered out, the Minister will certainly be long gone. He will probably be doing something much more exciting; he might even be in opposition—who knows? However, we must have a clear idea of what current Ministers consider should be the period over which the scheme washes its face.
Amendment No. 43 draws attention to the level of charges, which is an important point of principle. Without wishing to go back too much into the mists of time, a fundamental principle of the Turner report—the report of the Pensions Commission—was that personal accounts should be a low-cost vehicle for people who are not presently saving for their retirement. The dynamic in that principle is that the low cost should be delivered by what Lord Turner calls an advice-free model. There will be an opportunity later to discuss the sort of advice available. As we have heard, Otto Thoresen and his group are labouring long and hard to come up with an answer on so-called generic advice. It remains a fundamental policy objective of both the Pensions Commission and the Government that the charges are kept as low as possible.
Interestingly, the latest briefing of the Association of British Insurers says:
“The ABI is pleased to see that the Conservatives propose to debate scheme charges, via their amendments to Clause 62. We understand the amendment is probing in its nature, and intended to stimulate debate around scheme costs...The key principle guiding all decisions the Government takes on Personal Accounts must be that all costs incurred in establishing and running must be recouped from scheme members through charges as they are in any other occupational pension model”—
I made that point in the previous debate. The ABI states further that Tim Jones, the new chief executive of PADA,
“is already on record as having noted that a 0.3 per cent. Annual Management Charge...is too ambitious, and AMC of 0.5 per cent. or higher is likely to be more realistic.”
It would be interesting to hear the Minister’s thoughts on such matters and to find out whether he is still hoping for a 0.3 per cent. figure.
The ABI touches on the consultation on the charging structure and states:
“The ABI has already publicly announced that a hybrid charging model, probably constituting an AMC and another charging structure will be the only way that scheme costs, especially set-up costs, can be adequately managed...It is vital now, that the Government provides public reassurances that all up front set up costs incurred ahead of 2012 are paid for at commercial rates, by scheme members and not from public funds. That includes the large additional resource that will need to be allocated to The Pensions Regulator.”
It is also worth touching on one or two pieces of oral and written evidence that we have had before us. Which? said that it
“believes a low-cost scheme with a target Annual Management Charge...of 0.3 per cent. per year is the most appropriate charging structure because it is simple to understand, comparable with other forms of saving, fair for low earners and will maximise participation in the scheme.”
Mr. Haddrill of the ABI said:
“Talking to PADA recently, I think that it is coming to the view that this 0.3 mantra is the one that is going to be delivered”—
that might be a misprint. He continued:
“We always felt that it would be closer to 0.5 or 0.6. The numbers will come out when the numbers come out”.
Mr. Haddrill has a philosophical approach to life. He continued:
“but from our experience of running these things that is where we think it will end up.”——[Official Report, Pensions Public Bill Committee, 15 January 2008; c. 37, Q52.]
It will be fascinating to hear the Minister’s thinking on that and what he is being told by Mr. Jones, as he conducts his review of which we heard something the other day.
In its written evidence, the CBI said:
“keeping management charges as low as possible is essential and unnecessary complexity will drive up costs. Prohibiting inward transfers is an important measure to contain costs, enabling PADA to achieve an annual management charge for personal accounts scheme members that is close to the Turner Commission target of 30 basis points (0.3 per cent. AMC).”
Finally, when giving evidence, the Minister for Pensions Reform said:
“We have been clear in saying that we believe we can get the costs of running the scheme down to 0.3 per cent., although I made it clear in my evidence to the Select Committee that it may well be 0.5 per cent., at least initially. We think that we can keep the costs low and that the costs of setting up the scheme could be met primarily from the private sector.”——[Official Report, Pensions Public Bill Committee, 17 January 2008; c. 113, Q138.]
I am not quite sure what he meant by that. Perhaps the Under-Secretary will enlighten us and comment on the suggestion that the charge may be 0.5 per cent. initially, but might come down later, presumably as matters balance out. Does he think that it is sensible or logical to have a percentage charge that will change over time?
These are all probing amendments, so I do not want to worry the Minister too much. However, they all raise some important issues of principle.

Paul Rowen: This debate follows our earlier discussion about the operation of the scheme. Amendment No. 61 has more merit than the other two amendments in the group and establishes the important principle that costs are recovered. The words used in the schedule—“may make charges”—are far too weak. We ought to accept that we are going to incur costs and that those will be recovered.
When we contrast the debate on amendments Nos. 61, 43 and 52 with that on amendments Nos. 68, 69 and 65, there is some incongruity. Amendment No. 43 specifies what the management fee will be, whereas earlier we were saying that we wanted to see published, as part of the annual report, proper analysis—actuarial research—about take-up, persistency and contributions, with the basic principle being to ensure that the costs are recovered. Obviously, that needs modelling over time. I wonder why the Conservatives have alighted on the five-year period to 2012. I hope that PADA will publish the various assumptions and models in respect of which it operates, once those are available. Without that modelling, it would be inappropriate for us to set a time frame in which any start-up costs should be met.
The principle behind amendments Nos. 43 and 50 is right: management costs should be as low as possible. PADA, through the consultation that it has announced, will take advice and publish a report that will set out initial assumptions about the management fee. If we can accept the initial findings of the Turner commission on having as low a management fee as possible, and if the Minister can assure us that that is the principle on which the personal accounts will be operated, that is fine. I accept that it is wrong to stipulate a time frame until the models have been made. However, the principle should be that once PADA has run the models and consulted over an agreed time frame, it should have to say that it expects the scheme to have recuperated its costs and then return any loans—it should not, hopefully, need any grants—and say that it is operating properly. To try to be too restrictive at this stage would be inappropriate, although I agree with the principle that the hon. Member for Eastbourne is putting forward.

John Greenway: Given the long experience that you and I have had of serving on Standing and Public Bill Committees, Sir Nicholas, we know that as we discuss amendments, there is sometimes a sense that we should have worded them slightly differently. I have that sense with regard to amendment No. 43. I am sure that the Minister will give us a robust argument on what it would achieve, which would be a straitjacket of no more than 0.3 per cent. initially. I say to my hon. Friend the Member for Eastbourne that that is no more clearly defined than “long term”, but that is a joke between us. The wording that I might have alighted on would have been a target of 0.3 per cent. We are trying to elicit confirmation from the Minister that that is the target.
That said, I have grave doubts. I share the ABI’s view about whether that 0.3 per cent. is deliverable—the figure is much more likely to be around 0.5 per cent. We must also bear in mind that the stakeholder pension initiative failed because the Government insisted on the straitjacket of 1.1 per cent. of charges. That involved, potentially, the giving of advice, whereas with this arrangement there will be not advice, but information.
My hon. Friend referred to the Thoresen report, and I suspect that we are likely to see from the report, in about four or five weeks’ time, the introduction of a new word: “guidance”. That is not advice. That means that people will not have to be remunerated for giving an explanation to people who automatically enrol, which is the fundamental difference. That is why it is certainly possible—it should be achievable—for the management charges of this scheme to be significantly less than for stakeholder pensions. We need a clearer understanding of the Government’s expectation on record, and I am sure that the Minister will want to take the opportunity to enlighten the Committee further on that point.
While amendment No. 61 is a probing amendment, we need a clear statement from the Government that they expect PADA to make charges for the services that it provides. The wording of the Bill does not provide that commitment. However, there might be something that PADA wishes to do in the future for which it does not wish to make a charge, but for which, if we had the wording proposed in the amendment, it would have to make a charge.
One of the delights of being in Committee is that arguments flow back and forth. We seek the real substance of the Government’s intention. It is absolutely vital that PADA is obliged to make charges, but I can foresee circumstances in which something that they might wish to do would not necessarily involve making a charge. This is an important aspect of the Bill. I will not comment on the other amendment in the group, but I hope that the Minister will take this opportunity to try to give us further enlightenment on these two important matters.

James Plaskitt: I agree with the concluding comment made by the hon. Member for Ryedale: this is an important aspect of the Bill. I am grateful for the probing that members of the Committee are giving us because that is quite right and proper.
I say first to the hon. Member for Eastbourne, “Look behind you.” His colleague, the hon. Member for Ryedale, is right to say that we must be very careful about putting rigidities into the Bill, as the amendments would do. It is not right to put in rigidities at this stage when flexibility is necessary to maximise the chance of success.
When speaking in support of his amendment, the hon. Member for Eastbourne slightly gave the game away. He said, I think, that he did not know what the specific numbers would be, how long it would take to achieve a particular phase, or what the charging levels would be. He said that had “plumped for” a number to put into the legislation. That indicates that it would be an artificial constraint. If the only reasoning behind the numbers in the amendment is that they were “plumped for”, the proposal is no more secure than our suggestion on flexibility about which the hon. Gentleman is concerned.
The hon. Gentleman sees the difficulty of trying to have anything other than flexible arrangements in the Bill. I entirely understand why he wishes to probe the issue, but he has discovered that trying to go beyond such flexibility produces another set of problems. I suggest that if he pursued the road of trying to cement the charge at a particular level, that could add to the difficulties, such as regarding the need for other sources of funding to support the scheme, which he previously expressed concern about. He is arguing against his previous position.
If the hon. Gentleman wants reassurances about short-term public support for such a scheme, we need to give the authority flexibility on charging. If the funding from charging is constrained, that could increase the call on other sources of funding such as public support. From listening to the debate, one can understand the importance of the flexibility that the Government seek, which is why the Bill has been drafted in its present form.
As we have established, low charges are at the heart of the personal accounts scheme. As I have said, we want the scheme to be self-financing in the long term. The trustee corporation will meet all the costs of setting up and running the scheme through charges paid by members. However, the Bill enables the trustee corporation to fulfil that aim by allowing it to charge members for any costs that it incurs in relation to the exercise of its functions.
Amendment No. 61 would introduce the word “must” rather than “may” in relation to when the trustee corporation can levy charges. There are difficulties with that, as the hon. Member for Ryedale indicated. A permissive power is all that is required, and all that would be safe in the circumstances. The trustee corporation is intended to be independent from Government when acting as sole trustee of the personal accounts scheme. It is therefore right for it to retain some discretion, as long as it operates within the parameters that we have set down—mainly to be self-financing.
The precise level and structure of the scheme’s charges are still to be decided. As we have indicated, the structure is being consulted on, and the levels are to be determined later. That will depend on the costs of setting up and running the scheme, its detailed design, and the outcome of the commercial procurement process. We are aware that there is a consultation among stakeholders on the charging structure.
The hon. Member for Eastbourne pursued the point about when the charging structure decisions will be made. A final decision can be made only when the Personal Accounts Delivery Authority has completed its work on designing the scheme and all the commercial procurement processes. The authority will want to reflect on the responses to the charging structure consultation.
I expect that the charging structure will be set out in due course in the scheme order, which will, of course, be subject to further consultation and parliamentary scrutiny. The authority will want to reflect on the views that it receives in response to the consultation and on the recommendations that it provides to Ministers on the charging structure. It is vital that the delivery authority is given time and flexibility to complete its work and to develop a funding strategy that best balances members’ interests with delivering a scheme that is commercially viable, without compromising the Government’s intention for the scheme to be self-financing in the long term.
However, amendments Nos. 43 and 52 would restrict the delivery authority’s ability to find an optimal funding strategy by placing an upper limit on the membership charges that apply under the scheme and requiring that the scheme be self-financing within five years. This argument exposes one of the difficult trade-offs that the delivery authority must seek to balance in providing advice. Although we would want to move to self-financing as quickly as possible, we must ensure that members’ interests are not compromised.
A requirement for the scheme to be self-financing in five years would be likely to lead to unreasonably high charges for the first cohort of members. I do not think that the hon. Member for Eastbourne would wish that to happen. It would certainly eat into their savings and might result in high levels of opt-out at the very time when we want to see the scheme established and the maximum number of people staying in it. Equally, capping scheme charges at 0.3 per cent., as the hon. Gentleman proposes, would affect the revenues of the scheme in the way that I described and would be contrary to reassurances that he was seeking earlier in respect of public funding support.

Nigel Waterson: I might have misheard the Minister, but I should just reassure him that I was not suggesting starting with a higher charge and then reducing it. The Minister for Pensions Reform made that suggestion in evidence to the Committee.

James Plaskitt: The point that I am getting at is that the amendment is designed to cement a figure in the Bill and therefore impose a charge, which could significantly increase the scheme’s dependence on other forms of charging, including public support, which previously he said he wanted to ensure would not be unduly high because he wanted the scheme to become self-financing as quickly as possible. Flexibility in charging is essential to support that objective.
I cannot say what the charging structure and levels will be, for the reasons that have already been given. PADA is consulting on the structure. It will have to reach decisions about the structure before charging levels can be considered. Charging levels follow that because PADA has to do its work on the whole financial structure of the scheme, so it is not possible at this stage to predict what the charging levels will be or, indeed, whether they will be static. Lord Turner argued in his report that if, once the scheme was up and running, it worked in the way predicted and all other criteria were met, he was confident that a 0.3 per cent. charge was realistic. That is certainly the view that I would take, given the argument in the report.
There is a balance to be struck between the initial level of charges and the time that it takes for the scheme to become wholly self-financing. Given that, we need to allow the delivery authority both the time and flexibility to do its work before closing down options. The hon. Gentleman is seeking to close down options before that work starts, but that might impede the success of the scheme.

John Greenway: There are real tensions, even within the group of amendments. On the one hand, we want to ensure that all the costs are absorbed and charged for in the scheme. Equally, we want maximum take-up, which must mean a charge that is as low as possible. I think that the Minister is saying that, at this juncture, we are not in a position to say whether 0.3 per cent. is achievable, or whether the figure will be higher. Whatever the charge figure is, it will have a real impact on take-up and the general climate in which people will expected to stick with the scheme, and to auto-enrol and not opt out. There has to be a good deal for them. Does it remain the Government’s intention to set a target figure? For all the reasons that have been outlined, we cannot decide whether it will be 0.3 or 0.5 per cent. It is very important that the Minister makes it clear that the Government have a target. If PADA has so much flexibility, how does one deliver that figure?

James Plaskitt: No, I am not going to set a target—that would not be the right thing to do. Having read the Turner report, the hon. Member for Ryedale will understand why Lord Turner thinks that 0.3 per cent. is achievable. He is right to say that the charging level of the structure is critical to the success of the scheme at launch point. We need to have it launched in a context in which information on the charges shows quite clearly that they are a lot lower than alternative commercial schemes.
The hon. Member for Ryedale also knows that charge levels have a big impact on the kind of money that these schemes can release at the end when people come to decumulate. Across a lifetime, the scheme has a big impact. There will no doubt be a lot of debate and discussion about that at the point of launch. Therefore, it is essential that any comparison that is made clearly demonstrates that the charge structure is favourable compared with the alternatives. It would not be sensible to go beyond that. Turner’s argument in support of 0.3 per cent. is well known. Provided that all the launch processes are correct and all other aspects are sorted out, one would hope that such a charge level would be achievable. With those reassurances, I hope that the hon. Member for Eastbourne will agree to withdraw the amendment.

Nigel Waterson: The Minister accuses us of trying to insert rigidities into the Bill and says that we are giving the game away. I think that I did give the game away because I made it very plain that these were probing amendments that I did not intend to press to a Division. I am very sorry if the Minister has been on tenterhooks ever since then.
As probing amendments, though, these amendments have been a dismal failure. They have failed to probe through the mists surrounding ministerial policy. The Minister said that we plumped for five years. Yes, we plumped for five years because the Minister did not plump for any years. Is he talking about 10, 20 or 50 years, or even six months? Surely, without prejudice—as we lawyers say—he could come up with some kind of time scale. It matters to PADA so that it knows what it is aiming for, and it matters to the industry and to the Committee.
The Minister talks about flexibility, and flexibility is a wonderful thing. At times, though, I think that this personal accounts lark is a bit like trying to put up a tent in a high wind. Unless we nail down one corner, we will never make any progress. So much flexibility has emerged during Committee that one wonders what kind of beast we will end up with.
Then there is the question of Lord Turner. Lord Turner and his fellow commissioners not only argued for 0.3 per cent., but set out a cogent, detailed case for it as a fundamental part of delivering this advice-free model of personal accounts, and as part of their overall package. We should not treat Lord Turner’s pronouncements as holy writ. Not everything in the Turner report is as true now as it might have been at one time, but 0.3 per cent. is a fundamental pillar of the Turner proposals. If we really propose to leave the door open to a significantly higher annual charge than the one envisaged by Turner, a case must be made. Perhaps the Minister does not like being probed and does not want to come up with the answers, but sooner or later he will have to make a case.
People are still working on the figure of 0.3 per cent., or 30 basis points. The Minister is terribly keen not to come down on one side or the other—he missed his vocation and should have become a Liberal Democrat. However, “on the one hand” and “on the other hand” will not do in this instance. Is he talking about 60 basis points, as foreshadowed by Stephen Haddrill, or something even higher? As we move further away from the Turner figure, the justification becomes more difficult.
If the Minister is saying, “Well, this is not a matter for Ministers; we are just going to leave all this to the Personal Accounts Delivery Authority,” who knows what we will end up with? It must be a low-cost, simple vehicle, which is why advice is not being put into the package. If we start fiddling with this part of the package, as I have said in our other debates, we might have to reopen the question of advice and whether that can be factored in after all. Otto Thoresen might not be able to square the circle in relation to so-called generic advice.
I have made it clear that I am not going to press the amendment to a Division, but I am very disappointed by the Minister’s apparent inability to allow himself to be probed by so-called probing amendments.

James Plaskitt: I am more than happy to be probed. That is why I am here. The hon. Gentleman is right to probe me on this issue—I have no worry about that. I simply return to the argument that I made earlier: he is trying to tie the issue down before it is right to do so. To use his analogy, there will be pegs in the ground, but there is a question of timing. The hon. Gentleman is trying to put the pegs in now, which is far too early.
In 2010, when the scheme is launched, many things will have happened. Some of the pegs will be in the ground and the situation will be clearer. Scheme orders will be in place, for example, and PADA will have reached conclusions about the funding structure. Much more will be known, and by 2010 a lot more will be obvious, but the hon. Gentleman seeks to pre-empt all that work with his probing amendments by trying to insert specific numbers now, although it is right at this point to be flexible in the interest of ultimate success.
I think that as time moves on some of the certainty that the hon. Gentleman seeks will emerge, but that will happen at the appropriate time and in the appropriate circumstances, rather than artificially, now, before it is right.

Nigel Waterson: I do not want to pursue the boy scout analogy too far with pegs in the ground and “dib, dib” and all that. I just want to say—and then I shall finish—that I am not trying to pre-empt anything. If anything, I am trying to “post-empt” something. Turner’s figure was 0.3 per cent. All I am trying to say is that the onus is firmly on anyone, including the Minister, who wants a sharp move away from that to 0.5 or 0.6 per cent. or whatever it might be. That is the problem, but I am clearly flogging a dead horse, or a dead tent, so I beg to ask leave to withdraw the amendment.

Amendment, by leave withdrawn.

Nigel Waterson: I beg to move amendment No. 62, in schedule 1, page 55, line 33, leave out ‘must’ to end of line 34 and insert
‘publish and lay before Parliament a copy of the statement and report sent under sub-paragraph (5)(b) on the first working day following receipt.’.
I hesitate now to call any amendment probing, as I might be wasting my breath. The amendment would simply ensure that the report that will be prepared and will go through various stages should be laid promptly before Parliament. That seems eminently reasonable to me, and I cannot think that any but the most churlish Minister could refuse to accept that.

James Plaskitt: That was hardly a ringing speech in support of the amendment. I suspect that the hon. Gentleman knows that there is not much chance of it being accepted.
I hope that we can dispatch the amendment briefly. The simple point is that trying to ensure publication the next day is not practicable. Proof reading has to be done, printing has to be checked, and delivery and distribution have to be sorted out. I am sure that the hon. Gentleman hopes that great care will be taken to ensure that published material is accurate in the interests of correctly informing Parliament and the public. To impose an artificial next-day requirement would make it difficult to achieve that. One would run the risk of errors creeping into published information, and I do not think that he would want that.
Requirements are already in place for non-departmental public bodies on submitting their accounts, and the Government Resources and Accounts Act 2000 imposes outer limits on the timeliness of things being published. Those safeguards are adequate to ensure that things are done promptly, but accurately, in the interests of good public information.
With that assurance, I hope that the hon. Gentleman will withdraw the amendment.

Nigel Waterson: Having heard the Minister’s honeyed and reassuring tones, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Amendment made: No. 141, in schedule 1, page 56, line 42, leave out from beginning to end of line 6 on page 57.—[Mr. Plaskitt.]

Schedule 1, as amended, agreed to.

Clause 58

Functions

Nigel Waterson: I beg to move amendment No. 33, in clause 58, page 27, line 26, leave out paragraph (b).

Nicholas Winterton: With this it will be convenient to discuss amendment No. 34, in clause 58, page 27, line 28, leave out subsection (4).

Nigel Waterson: We are back on money again. Amendment No. 33 would curtail the powers of the trustee corporation to borrow money. I am happy not to press the amendment if the Minister is able to give me the assurance that he was not able to give on the previous amendment—that any money borrowed would be borrowed on commercial terms and repayable over a reasonable time.
Amendment No. 34 would remove subsection (4). The hon. Member for Rochdale spoke on previous amendments about the Secretary of State being a control freak when it comes to dotting all the i’s and crossing all the t’s. Surely, if we are setting up the corporation with proper people, any power that they have, particularly under subsection (3), to enter into agreements and to invest money, particularly if the power to borrow money is to be removed from them, they can do on their own without regularly having to go to the Secretary of State cap in hand.
Those are the reasons behind the amendments. I commend them to the Committee.

James Plaskitt: Yes, indeed, we are back on money. I shall try again to reassure the hon. Gentleman. We are clear in the intention that the personal accounts should be self-financing in the long term, something that we have already established. However, we know that there will be periods when the scheme will have insufficient revenues to cover its costs. Clearly one source of financing for those costs could be borrowing, which could be from the private sector—the banks or even other pension providers—or from the Government, or a mix of both. We do not know at this point—we could not possibly know—if borrowing will be required. I have touched on the delivery authority’s role in recommending a financing strategy for the personal accounts scheme, and we will have more opportunity to consider it when we reach clause 61.
I reassure the Committee that, if borrowing is required, like any non-departmental public body the trustee corporation will need to comply with existing guidance and legislation to show that value for money for the taxpayer can be achieved. It is important to stress that a decision about how the personal accounts scheme should be financed has yet to be taken. We can only be certain of the right approach when the delivery authority has been given time to finalise the scheme design, develop its procurement strategy and engage with the market, which it can do only when its functions are extended under clause 61. It is vital at this stage that we do not restrict the options for financing the scheme. Doing so would compromise the ability to get value for money for members who are participants in the scheme. By taking away the trustee’s ability to borrow, amendment No. 33 would do just that.
Amendment No. 34 would allow the trustee corporation to borrow and invest, but without the consent of the Secretary of State. As a non-departmental public body, it is normal for functions such as borrowing and investing to require the consent of the Secretary of State. That is because an NDPB’s financial arrangements are to be taken into account in its parent Department’s budgets. Therefore, it is right and necessary that it is subject to scrutiny by its sponsor Department’s Secretary of State. That provides a safeguard to ensure that the wider interests of the taxpayer are taken into account, as well as the NDPB’s objectives. In the case under discussion, the trustee corporation would be responsible for balancing low charges for members against ensuring that the scheme is commercially viable. However, the Secretary of State’s consent is needed to ensure that its actions would not jeopardise the sound management of the Government’s finances.
I ask members of the Committee to note that we have made one exception to that rule under clause 58, which reflects the trustee corporation’s role as sole trustee of the personal accounts scheme. Provision has been made in subsection (5) to ensure that the trustee corporation retains an ability to act independently when acting as the trustee of the personal accounts scheme—for example, with regard to investing members’ contributions to the scheme. In the case of investing, it is clear that that must be the responsibility of the trustee acting in the members’ best interests.

Nigel Waterson: I need to check that I am following the Minister’s remarks correctly. Is he saying that, under certain circumstances, subsection (5) could overrule subsection (4) so that in some cases when the trustee corporation is exercising certain powers under the scheme as set out in clause 50, it might not need the consent of the Secretary of State, or are we into an entirely circular situation?

James Plaskitt: I am making an important separate distinction, which I have tried to explain. It concerns the importance of the trustee corporation’s ability to act independently when acting as trustee to the personal accounts scheme. That is a separate set of circumstances, which is why the provision has been made.
The hon. Gentleman asked whether non-commercial rates would ever be contemplated. As in other issues such as grants, it is difficult at this point to anticipate the position. It would largely be for the market to determine when loans are being sought. Again, I say to him that, if we tried at this stage to impose severe restrictions on any of the financial options, even though an individual restriction that he sought might have reasons behind it, that would damage the overall context of allowing flexibility and protecting all of the other interests that he rightly wants safeguarded. Pinning down any one restriction would potentially raise difficulties in others. I am sure that he would want, across the whole of the funding arrangement, to maintain flexibility, not only to ensure the success of the scheme, but to minimise any set of issues that might arise if there was over-reliance on one particular source of funding, as I tried to argue in respect of charge levels.

Nigel Waterson: Is the Minister saying that in the case of the trustee corporation, as opposed to PADA, it is envisaged that when it borrows money, that will be in the markets rather than from the Treasury?

James Plaskitt: It will have a range of options open to it, which is the whole point of my argument about flexibility. It may well take private money, it may well have a loan from public sources. That is all the more reason why it is important at this stage to retain flexibility about funding requirements, so that all options are there, in order to protect and maximise the options for the scheme’s success, bearing in mind the point that I have made about transparency and that any loan, or even grant support, to the authority would have to be consistent with the European requirements. As it happens, those requirements allow for the option of grants because this is a service of general economic interest and in those circumstances particular rules apply.

Nigel Waterson: The Minister has been helpful, for a change. Is he convinced that the European regulations are directly relevant here? The Government are not proposing to give grants to a manufacturer of aircraft wings or whatever. The personal accounts system will not be competing in any sense with any similar organisation in other European member states, so I wonder how relevant the European dimension is to this situation.

James Plaskitt: Very relevant is the answer, because the regulations that I refer to relate to what are known as services of general economic interest. As the hon. Gentleman rightly says, that is not comparable to a manufacturer in a competitive situation, but the regulations are specifically set down because there will sometimes be large-scale services that are deemed to be of general economic interest. In those circumstances, where there are not the usual commercial constraints, it is important to have a set of rules about the degree to which they may be publicly funded. That is why I cite the rules; they are specifically important for this precise set of circumstances. With those reassurances, I hope that he will agree to withdraw his amendment.

Nigel Waterson: I am grateful to the Minister for taking such trouble over his explanation and I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 58 ordered to stand part of the Bill.

Clauses 59 and 60 ordered to stand part of the Bill.

Clause 61

Functions

Nigel Waterson: I beg to move amendment No. 35, in clause 61, page 28, line 23, leave out paragraph (b).

Nicholas Winterton: With this it will be convenient to discuss amendment No. 105, in clause 61, page 28, line 26, after ‘Part’, insert ‘but excluding sections 14 to 24’.

Nigel Waterson: The efforts on this group of amendments are a double-act, and I will leave the hon. Member for Rochdale to make his case for amendment No. 105, partly because I am not sure that I fully understand it. No doubt he will enlighten the Committee in a moment. Amendment No. 35 seeks to remove paragraph (b) of subsection (2). Clause 61(2)(b) adds to the functions of the Personal Accounts Delivery Authority, allowing it
“to give any assistance and advice that the Secretary of State or the Pensions Regulator may require, and any advice that the Authority considers expedient, for or in connection with arrangements to enable requirements imposed by or under Chapter 1 of this Part to be complied with and enforced.”
This is a probing amendment: I want the Minister to tell us the sort of situations in which he envisages that subsection (2)(b) would apply. Subject to that, I would not dream of pressing it to a division.

Paul Rowen: This is an important aspect of the Bill. We are looking at the functions of the Personal Accounts Delivery Authority, and amendments Nos. 35 and 105 seek to clarify the relationship of PADA to chapter 1 of the Bill. Chapter 1 sets the context in which personal accounts will operate in the pensions market. It mentions occupational pensions schemes, quality requirements, tests schemes and test-scheme standards—a whole range of issues that affect the pensions market. My support for amendment No. 35 and the reason we have tabled amendment No. 105, is because we were unclear, looking at its functions and at clause 61(2)(b), why PADA should advise the Secretary of State on a range of issues for which it is not responsible.
PADA is the delivery authority that will set up personal accounts. It will then hand that over to the pension trustee. In my view, it should not take an interest and involvement in the wider area. Occupational pensions schemes are already regulated, both here and in earlier Bills. It is important that PADA’s functions are clear from the beginning. Chapter 1 sets out the overall content of pensions. It moves on to define the responsibilities of various groups. That could be the responsibilities of the Pensions Regulator—another body whose modus operandi is changed by the Bill—or those of the Secretary of State, or of PADA. PADA should not be advising the Secretary of State on the totality of chapter 1 and if we accept clause 61(2)(b), that is what we will do.
Our amendment is slightly clumsy. It seeks to remove from chapter 1 clauses 14 to 24 which, in our view, have nothing to do with the operation of PADA. They may not be the responsibility of the Pensions Regulator, or those of the Secretary of State, in terms of the operation of the pensions market. However, given that it is PADA’s responsibility to set up personal accounts, we do not believe that it should have the responsibility or possibility of giving advice to the Secretary of State on issues that are not within its responsibility. The operation of occupational pension schemes and the job of the Pensions Regulator, which are covered in chapter 1, are not issues for PADA. It has to be focused and clear. It has a job to do in a short space of time, and if it is advising the Secretary of State on everything else to do with pensions, it will not do the job that it was set up to do. That is why amendments Nos. 35 and 105 are appropriate.
We think that the clause is another example of civil servants going awry. They are trying to include everything, including the kitchen sink, but we do not believe that that is appropriate in this case.

James Plaskitt: We are moving into another important part of the Bill. Clause 61 deals with the functions of PADA. I am grateful to hon. Members for introducing their amendments and for giving me the chance, I hope, to reassure them on the points that they have raised. I understand why they raised them.
The clause sets out the scope of the authority’s functions, allowing it to continue to advise on policy but also to undertake the detailed implementation work necessary to establish the personal accounts scheme and to support the regulator in establishing the processes to maximise employer compliance with the new duties. The amendments would prevent the authority from undertaking some, or all, of the second part of that role, but it is absolutely important that it does, for reasons which I shall try to set out.
The Bill introduces an obligation on employers to enrol eligible workers into a workplace pension and to make contributions to it. We could not introduce such a duty on employers without also having an effective compliance regime—the two go hand in hand. Otherwise, there would be no way of ensuring that more workers have the opportunity to benefit from the reforms, nor of ensuring that employers comply with the law and do not in any way disadvantage their work force.

Paul Rowen: Does the Minister accept that compliance is the responsibility of the Pensions Regulator, not PADA?

James Plaskitt: I am about to come to that very point. I am sure that if the hon. Gentleman will just hang five, we will get there.
This is a major project, and although the regulator will be leading on delivery, there are benefits at this stage to be gained from sharing expertise. Many of the challenges in setting up an effective compliance regime are not dissimilar to the challenges in establishing the personal accounts scheme; for instance, specialist planning and project support for what is, clearly, a large programme. There is a significant amount of preparatory work to be done on the design of the compliance processes.
That work needs to start quickly, and we do not want to jeopardise the timetable for delivery. We think that the most effective approach to the scale of the project is for the regulator and the Department to utilise the authority’s resources, skills and expertise in the design of the personal accounts scheme, and in support of the establishment of a compliance process. I believe that the hon. Gentleman accepts that that is of critical importance.
Amendment No. 35 would prevent the regulator having access to the authority’s experts in such areas as project management, procurement and design. I am aware that in taking the approach that we are, there could be a perceived conflict of interest between delivering the personal accounts scheme and supporting delivery of the broader compliance regime. I believe that that is what is exercising hon. Members in this group of amendments.
Let me be absolutely clear: the regulator, not the delivery authority, will be responsible for ensuring that the compliance regime is fit for purpose. That is a clear distinction. The role of the authority will be restricted to supporting delivery of the compliance processes, and clause 61 simply enables it to carry out that role. Its detailed remit will be set out in other documentation, largely the framework document still to come. It will clearly specify the degree of the authority’s responsibilities in supporting the regulator, and also its more substantial role in respect of personal accounts.

Nigel Waterson: We have been here before. A few months after the passing of the 2004 Act, which set up the regulator and the Pension Protection Fund, it became apparent that a written protocol was needed to work out the boundaries between the two. Are we not heading for the same problems in this instance?

James Plaskitt: No, I do not think that we are. I am saying that these bodies need to show their authority and expertise during the building process. Once we move into the regime, however, the functions are very clear and do not have the overlap that the hon. Gentleman is concerned about. The boundaries will be very clear once the scheme is in operation. Furthermore, the authority’s annual business plan will set out its key objectives and targets. Both of those will be published along with the framework document once the authority has legal authority to carry out its extended role. Those governance and practical arrangements, supported by robust stewardship from our Department, will ensure that any potential conflict of interest is removed from the decision-making process.

Paul Rowen: On the framework document, can the hon. Gentleman give us a time frame in which he expects it to be published? Clearly, the document is key to removing some of our concerns about how the clause will operate.

James Plaskitt: It is a key document, and the hon. Gentleman is right to describe it as such. I cannot tell him precisely when it will be available. It will be available for study in the Library of the House in plenty of time before the scheme is up and running. I am grateful to the hon. Gentleman for clarifying amendment No. 105, which seeks to exclude the authority from even giving advice and assistance on clauses pertaining to qualifying schemes.
Let me try to reassure the hon. Gentleman that there will be no conflict of interest here. While the authority will be able to advise the Secretary of State on setting the criteria for qualifying schemes, there will be no role beyond that. Any body or stakeholder that the Government consult when drawing up the regulations will have no additional role. It will be for the Secretary of State to satisfy himself that the regulations achieve the appropriate policy outcomes and to ensure that the criteria continue to support all good quality provision. In due course, it will be for the House to pass those precise regulations.
Moreover, excluding the authority from providing support to the regulator, under clauses 14 to 24, as the amendments seek to do, could, in fact, lead to a confused and fragmented approach. That is another kind of problem that I am sure the hon. Member for Rochdale would want us to avoid. It would be very difficult for the authority to offer constructive support on the compliance process without regard to the spectrum of schemes that could fulfil those duties.
In summary, robust Government arrangements will ensure that the regulator will be responsible for questions of design in the compliance regime and the authority will be restricted to supporting delivery. With those reassurances, I hope that the hon. Gentleman will agree to withdraw his amendment.

Nigel Waterson: I am grateful for the Minister’s reassurances. It seems that we have to wait for the framework document, which will answer all our concerns and worries. I beg to ask leave to withdraw my amendment.

Amendment, by leave, withdrawn.

Nigel Waterson: I beg to move amendment No. 36, in clause 61, page 28, line 36, leave out paragraph (b).

Nicholas Winterton: With this it will be convenient to discuss amendment No. 37, in clause 61, page 28, line 37, leave out subsection (7).

Nigel Waterson: The amendments may have a familiar ring to them. The Minister can just read out what he said in answers to previous amendments. Amendment No. 36 seeks to take out the authority’s power to borrow money, which is a bigger concern for us than the trustee corporation. I do want not want to rehearse those arguments. We need clarity about where PADA is going to get its money from, whether it will get a bung from the Government if it gets its figures wrong and whether it will be lent money at absurdly low interest rates, or no interest rate at all, and so on.
Amendment No. 37 would remove subsection (7), which has the Secretary Of State getting in on the act yet again. That is the right approach and it is encapsulated neatly in the two amendments, which set out clearly the parameters for the PADA to operate in and let it get on with it.

James Plaskitt: As the hon. Member for Eastbourne said, there is a certain familiarity about the arguments that we are engaged in, so I will try to be as brief as possible.
As we have already established in debates on previous amendments this morning, there will be an initial period when the scheme has insufficient revenues to cover all its costs. For example, it is envisaged that the authority will incur costs in finalising the design of the scheme and making payments to contractors before the scheme has actually opened its doors to its first members. Clearly, given our intention that the scheme be ultimately self-financing, the likely source of financing for those costs could, indeed, been borrowing. However, as I hope I have already made it clear in earlier debates, no decision on how the personal account should be funded has yet been taken and we have not yet decided whether any borrowing will be from the private sector, the public sector or from a mixture of both: that will depend on a number of factors, including the scale of any borrowing requirement and the willingness of the private sector to engage with a project of this scale.
We can only be certain of the right approach once the authority has been given time to finalise the scheme design, develop its procurement strategy and engage with the market. If borrowing is required, then, like any other non-departmental public body, the Personal Accounts Delivery Authority will need to comply with all the existing guidance and legislation to show that value for money can be achieved.
As we have heard in previous debates, it is vital that we keep all the options open at this stage and allow the authority to recommend the best financing strategy for the personal accounts scheme. We should, at this stage, try to tie the authority’s hands by removing any of the options that are open to us.
Conversely, amendment No.37 would allow the authority to borrow, but, again, it would remove the requirement for the Secretary of State's consent. As the Committee will be aware, it is normal for borrowing by non-departmental public body to require precisely that consent, because its financial arrangements are required to be taken into account under its parent Departments’ budgets. Therefore it is right and necessary that such an arrangement is subject to scrutiny by the sponsoring Department’s Secretary of State. That process also provides a crucial safeguard to ensure that the wider interests of the taxpayer are being taken into account and, indeed, that the personal accounts scheme will be self-financing in the long run and will meet the non-departmental public body’s objective to set up a scheme that balances low charges for members against ensuring that the scheme is commercially viable.
For reasons that are, by now, somewhat familiar, I hope that the hon. Member for Eastbourne will ask leave to withdraw his amendment.

Nigel Waterson: The familiarity of the arguments makes them no more persuasive. The Minister’s reiteration of what Donald Rumsfeld calls the known unknowns—let alone the unknown unknowns—is tedious to the point of rendering us comatose. I will not tempt the Minister to say any more about this, so I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 61 ordered to stand part of the Bill.
Further consideration adjourned.—[Mr. David.]

Adjourned accordingly at nine minutes to One o'clock till this day at Four o'clock.